Against the tide, Connecticut helps the working poor

It was nearly lost amidst the challenge of a gargantuan deficit, the outcry over a record tax increase, and the drama of a new Democratic governor’s struggle to obtain concessions from his allies in organized labor.

But Connecticut was the only state to adopt an earned-income tax credit this year, a long-sought benefit for the working poor in a time of fiscal crisis, when other states reduced their tax credit or slashed other social programs.

“This is about working families and encouraging work and making our economy stronger,” Malloy told an audience of advocates, calling its passage one of his proudest accomplishments in an eventful first year as governor.

The celebration had another purpose: to mark the start of an outreach effort to publicize the availability of the tax credit, which can provide as much as $1,700 to eligible workers.

The IRS estimates that one fifth of eligible tax filers fail to claim the federal earned-income tax credit.

The credit is generally available to workers who earned $48,000 or less in 2010 and were raising children, as well as single workers without children who earned less than $13,460. The average state payment will be about $540.

Kevin Sullivan, the commissioner of revenue services, said no eligible worker should have to pay a tax preparer to obtain the tax credit. Help to file is available from an extensive network of volunteers.

The tax credit was first proposed in Connecticut in 1999 by an advocacy and research group, Connecticut Voices for Children, with Looney as a prime sponsor. Twice, an earned-income tax credit was included in budget, only to be removed at the insistence of a Republican governor.

Looney wryly acknowledged his 12 years of work on the issue as he stepped forward Tuesday to accept an award.

“First of all, I want to make the argument against term limits,” Looney said.

His audience laughed.

Some in the audience had fought with Malloy over his tax increases, which included the first sales-tax hike in 20 years. They complained that income tax increases should have landed more heavily on the wealthy.

But Jim Horan, the executive director of the Connecticut Association for Human Services, said Malloy still proved to be a strong protector of the working poor in one of the worst fiscal environments in decades.

Faced with an inherited deficit of more than $3 billion, Malloy minimized social service cuts and more than offset the impact of the sales tax increase by passing one the nation’s most generous earned-income tax credits, he said.

Next week, Horan is speaking at a national conference on budget priorities, where others are expected to report harm suffered by the working poor in their states, where the value of the tax credit was reduced.

“That’s now the trend, to cut back on it,” Horan said.

Malloy convinced the General Assembly to increase the sales tax from 6 percent to 6.35 percent and expand the list of taxable items to clothing under $50.

The earned-income tax credit adopted by Connecticut is worth 30 percent of the similar federal credit. It will cost the state $108 million. Combined with the federal credit, it will put about $500 million in the hands of working families.

“This was an important statement about our values. And our values are to encourage work and to support working families,” Malloy said after the ceremony. “And we did that in this budget, even though we had some great difficulties.”

In a dozen communities, at least 15 percent of tax filers are believed to be eligible for the credit: West Haven and Ansonia, 15 percent: Meriden, 16 percent; Norwich and East Hartford, 17 percent; Windham, 20 percent; New Britain, 21 percent; New London and New Haven, 22 percent; Waterbury, 23 percent; Bridgeport, 25 percent; and Hartford, 31 percent.

But the tax credit also is available to some residents of the state’s wealthiest communities, including 4 percent of filers in Greenwich, Glastonbury, Fairfield and Farmington.